Commissioner Clements’ Concurrence in the Transco Matter

Docket No. CP21-94-000

I concur with the decision to issue a certificate of public convenience and necessity to Transcontinental Gas Pipe Line Company, LLC (Transco) for its Regional Energy Access Expansion (REAE) project.[1]  I do so because the decision comports with our 1999 Certificate Policy Statement.  However, I write separately to highlight the inadequacies of the 1999 Certificate Policy Statement and our existing procedures for eliciting and considering evidence pertaining to project need today, in 2023.  Twenty years ago, the Commission was primarily concerned about assuring there would be sufficient natural gas transportation capacity to serve growing demand for natural gas.  Now, a combination of market forces and federal, state, and local climate protection policies may lead to flat or declining demand for natural gas over time.  The circumstances impacting the need for new pipeline capacity are an order of magnitude more complex than they were in 1999, but our policies and practices have not evolved to address that complexity.  The Commission should draw on its experience in this proceeding to update the 1999 Certificate Policy Statement – as well as our certificate application review procedures – to ensure we fully evaluate all the important variables affecting the need for each proposed new project.       

The Commission’s 1999 Certificate Policy Statement calls on the Commission to consider “all relevant factors reflecting on need for the project.” [2]  This information includes, but is not limited to, “precedent agreements, demand projections, potential cost savings to consumers, or a comparison of projected demand with the amount of capacity currently serving the market.”[3]  The 1999 Certificate Policy Statement further provides that “the evidence necessary to establish the need for the project will usually include a market study.”[4]  Notwithstanding the plain language of the policy statement, over time, the Commission has come to rely almost exclusively on precedent agreements to establish project need.  Although the courts generally have deferred to the Commission’s need determinations, failure to consider credible evidence contradicting the claimed need for a project violates both the Natural Gas Act and the Administrative Procedure Act.[5] 

In this case the Commission actually has done what it said it would do in the 1999 Certificate Policy Statement, and that is a meaningful step forward.  In addition to considering Transco’s precedent agreements, we have also considered market studies and shipper submissions to determine that the proposed REAE project is needed.[6]  Nevertheless, by denying an evidentiary hearing[7] and relying only on the paper record, we have left important questions unanswered.            

Perhaps the most glaring omission in the Commission’s need analysis is any discussion of the weight the Commission should accord to the finding of the New Jersey Board of Public Utilities (NJ BPU) that no additional pipeline capacity is needed in New Jersey.  The state has set ambitious targets for reducing greenhouse gas emissions.[8]  The NJ BPU is one of the lead agencies in New Jersey responsible for achieving those goals.  It is also the principal regulator of the four New Jersey local distribution companies (LDCs) that have entered into precedent agreements for a combined 56% of the REAE project’s capacity.[9]  The NJ BPU conducted a stakeholder process and commissioned an independent study by London Economics International Group (the NJ Agencies Study) to determine whether New Jersey needs additional natural gas pipeline capacity.  Based in part on state plans to reduce the use of natural gas, the NJ BPU adopted the NJ Agencies Study and concluded, by order, that New Jersey does not require additional capacity.[10]  Our decision accords no special weight to the NJ BPU’s determination, instead treating the NJ Agencies Study and the NJ BPU’s order as on a par with Transco’s market study (discussed below).  As more states adopt laws and policies like New Jersey’s, we should expect more frequent and active participation by states and their utility regulators in our certificate proceedings.[11]  Rather than improvising case-by-case, we should determine as a matter of policy how to consider and weigh relevant state laws, programs, and administrative determinations in future certificate proceedings.      

Transco commissioned its own market study, prepared by Levitan and Associates, which finds there will be a design day capacity shortfall without the REAE project.  Reliability is always a key concern for the Commission, so the reliability issues the Levitan study identifies must be taken seriously.  Yet, the Levitan study contradicts the findings of the NJ BPU, which is the agency responsible for assuring that New Jersey LDCs deliver reliable natural gas service.  The Levitan study takes the LDCs’ design day demand forecasts at face value; it does not ask what the bases for the forecasts are or the degree to which the forecasts reflect state energy policies and programs.[12]  Nor has the Commission endeavored to answer those questions itself.                 

Other important need-related questions include the timeline for, and likely efficacy of, New Jersey’s building electrification and other planned measures to reduce reliance on natural gas.  Having confined itself to the paper record that the parties created, the Commission cannot answer these questions.  Leaving the job half-done, the Commission essentially dismisses the totality of New Jersey’s efforts with the observation that the “non-pipeline” alternatives addressed in the NJ BPU’s order are not mandatory.[13]  Although this approach may be defensible under the 1999 Certificate Policy Statement, it surely is not optimal.

Some may ask why the Commission should concern itself with an LDC’s actual need for natural gas since the state utility regulator can decide the LDC imprudently entered into the agreement.  The answer is simple.  The Commission is responsible for making its own public interest determination under the Natural Gas Act, and the public interest encompasses much more than the costs that may be unjustifiably imposed on the LDC’s ratepayers.  The Commission cannot avoid its statutory responsibilities through reflexive reliance either on the views of state utility regulators or a project sponsor’s precedent agreements.  Nor can we whistle past the fact that the wider public ultimately pays the price when the Commission allows construction of unneeded new capacity.   That price may include the permanent loss of land taken by eminent domain, other property damage, disruption to environmental justice and other communities in the project vicinity, and environmental damage. 

With so much at stake, and so many variables affecting future demand for natural gas, the Commission’s relatively superficial approach to evaluating project need will become increasingly untenable, both legally and practically.  We should update our Certificate Policy Statement to provide for the full evaluation of all relevant information pertaining to need, including the effect of relevant federal, state, and local policies and programs on demand for natural gas to be transported by the proposed project.  The Commission also should clarify that data requests, independent Commission staff analyses, and evidentiary hearings are appropriate tools to include in our need evaluation toolbox.  In short, it is time for the Commission to implement policies and practices that reflect today’s realities.                     

For these reasons, I respectfully concur.